Morning Bid: Yields give way

On Monday, tensions escalated between the U.S. and Iran, leading to a surge in energy prices and long-dated government bond yields. The bellicose rhetoric from Iranian officials, coupled with President Donald Trump's uncompromising tone, suggested the energy blockade in the Gulf could persist for weeks or even months. This precarious situation for oil markets and inflation-pressured bonds intensified as winter approached, potentially exacerbating inflation concerns.

Despite a reduction in Fed rate hike expectations, long-dated yields reached their highest levels in 19 years, likely influenced by worries about the Fed's ability to bring inflation under control. This market turbulence was reflected in Asian shares closing lower and Wall Street futures declining before the market opened. Additionally, a Reuters/Ipsos poll revealed that just 33% of Americans approved of Trump's performance, while 64% disapproved, with 80% believing the U.S. war with Iran would last a long time.

The poll also showed that 38% of voters believed Democrats would handle the economy better than Republicans in the upcoming mid-term elections.